RBS limits subprime crisis hit to £1.25bn

It also said it will beat profit forecasts, and that pushed its shares up 36p to 501½p. The NatWest owner revealed it would take a subprime-related writedown of £950 million for the year. Adding in writedowns at ABN Amro, acquired for e71 billion (£51 billion) two months ago, the total rises to only £1.25 billion. Barclays' writedown, announced last week, was £1.3 billion.

Investors had been becoming increasingly concerned about RBS ahead of today's trading update, not just because of its direct exposure to the subprime market through US offshoot Citizens but also because it is a large player in the leveraged buyout market. Estimates for the scale of writedowns it would announce had ranged from £1.1 billion to £1.9 billion before taking account of ABN, so today's number was much better than the City had feared.

Chief executive Sir Fred Goodwin said that profits, excluding writedowns and exceptional gains, are "expected to be well ahead of market consensus". The average forecast from 20 analysts had until today been that headline profits would rise from £9.2 billion in 2006 to £9.77 billion this year. Now it looks certain that the bank will comfortably top £10 billion.

Goodwin also had good news on the takeover: "The integration of ABN Amro is off to a promising start, and we now anticipate better financial returns than we envisaged at the time of the bid. More importantly, the increased exposure to many high-growth economies that ABN Amro brings us seems more attractive and relevant than ever."

However, Goodwin is facing a potential revolt among the 2000 ABN investment bankers who are joining RBS over the bonuses promised by the Dutch bank when the takeover battle began in the spring.

RBS, on its own, had a total of £1.2 billion of writedowns, of which £950 million was subprime-related and £250 million was on leveraged finance activities.

But it offset these to the tune of £250 million by funding more internally than through the money markets. ABN Amro writedowns totalled £300 million. RBS said that at the end of November after the writedowns, its remaining exposure to subprime was £1 billion and its exposure to asset-backed securities including collateralised debt obligations (CDOs) was £2.4 billion.

At ABN Amro, the remaining exposure is almost entirely in so-called super senior, high-grade CDOs, and totals £1.7 billion.